MSCI paves way for overseas listings to enter indexes

GregorStuart Hunter

MSCI will allow shares of companies trading outside their home markets to enter their native country indexes, a move which is likely to funnel billions of dollars in capital flows toward companies that lack a domestic listing, such as Alibaba
BABA, -2.52%
.

But the index provider declined to include Russian companies among those which would be assessed for entry, citing investor concerns. Stocks that will be included in MSCI’s indexes will be announced in November.

The rule change benefits companies with a primary listing outside of their home market, which at present are excluded from global benchmarks as a consequence. The largest such group of companies are in the Chinese Internet sector, many of which trade in the U.S.

The MSCI World and MSCI Emerging Markets Index are among the biggest global benchmarks. Inclusion in these gauges can compel passive funds tracking them to divert billions of dollars of capital to certain stocks, and changes to the indexes are heavily scrutinized by active managers seeking to anticipate these flows.

FTSE, another index provider, said last week it is in the preliminary stages of considering a similar rule change.

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